Intel to axe 10 percent workforce

In an attempt to become more efficient to face the competition in the computer chip market, Intel Corp. has announced its biggest restructuring in 20 years. By the middle of 2007 Intel has planned to cut its work force by 10,500 employees, or about 10 percent. These job cuts are expected to reduce expenses by about $2 billion in 2007.

Intel Chief Executive Paul Otellini thanked the employees for their hard work during the period of ambiguity. He also acknowledged them for helping the company to launch a series of new products that are key to its turnaround.

The much-anticipated announcement by the world’s leading computer chip maker made clear that out of payroll of 99,000 people about 10,500 would be laid off. "These actions, while difficult, are essential to Intel becoming a more agile and efficient company, not just for this year or the next, but for years to come," said Otellini.

Intel has already announced layoffs of 1,000 managers, and asset sales that will cut 2,000 employees. The company expects about 2,000 more cuts through attrition, said Intel spokesman Chuck Mulloy. The chip maker also planned to cut costs for merchandising, capital and materials.

Chuck Mulloy stated "In 2007, the reductions will be more broadly based, as Intel improves labor efficiency in manufacturing, improves equipment utilization, eliminates organizational redundancies and improves product design methods and processes."

Krishna Shankar, an analyst at JMP Securities, said that since Intel didn't eliminate any of its big money-losing businesses the cuts aren't radical. “But the operating-expense reductions and cost savings nevertheless appear very significant,'” he said. “Intel is battening down the hatches for a long and prolonged period of pricing declines, sustained competition with AMD, and changing dynamics such as growth in low-cost, emerging markets like China and India.”

The layoffs are part of Intel's ongoing efficiency analysis to determine the right structure in a time of increased competition and slowing PC industry sales. Overall, in 2008, Intel expects to save $3 billion by cost reductions it is implementing in the next year or so, and another $1 billion by making better use of its existing plants. The job division costs are expected to total $200 million.